PROPOSAL 1
APPROVAL OF ISSUANCE OF GREATER THAN 19.99% OF OUTSTANDING COMMON STOCK
PURSUANT TO THE LINCOLN PARK TRANSACTION
Our board believes it is in the best interest of the Company and its stockholders to approve the issuance of the full number of shares of Common Stock available under the Purchase Agreement that the Company entered into on November 3, 2017 with Lincoln Park.
Pursuant to the Purchase Agreement, Lincoln Park has agreed to purchase from us up to an aggregate of $15,000,000 of our Common Stock (subject to certain limitations) from time to time over the thirty-month term of the Purchase Agreement. At the time we signed the Purchase Agreement, we issued 943,396 shares of our Common Stock (the Commitment Shares) to Lincoln Park as consideration for its commitment to purchase shares of our Common Stock under the Purchase Agreement. Our board of directors unanimously approved this transaction.
Under the Purchase Agreement, we may, from time to time and at our sole discretion, direct Lincoln Park to purchase shares of our Common Stock in amounts up to 250,000 shares on any single business day, and such amounts may be increased to up to 350,000 shares on a single business day if the market price of our Common Stock meets certain price thresholds set forth in the Purchase Agreement, subject to a maximum of $500,000 per purchase. We will control the timing and amount of any sales of our Common Stock to Lincoln Park, subject to certain trading volume, share price and beneficial ownership limitations set forth in the Purchase Agreement. The Purchase Agreement may be terminated by the Company at any time at its discretion without any cost to the Company.
All shares of Common Stock will be issued pursuant to our registration statement on Form S-1 (File No. 333-221368), previously filed with the SEC on November 6, 2017 and declared effective by the SEC on November 17, 2017. The shares of our Common Stock to be issued to Lincoln Park are not subject to preemptive rights. We did not receive any cash proceeds from the issuance of the Commitment Shares.
Reasons for the Proposal
Our Common Stock is listed on the NASDAQ Global Market under the symbol AVGR, and we are subject to the NASDAQ listing standards set forth in its Marketplace Rules. NASDAQ Stock Market Rule 5635(d) requires stockholder approval prior to the sale, issuance or potential issuance of common stock (or securities convertible into or exercisable for common stock) in a transaction other than a public offering: (a) at a price less than the greater of book or market value which together with sales by officers, directors or substantial stockholders of the company equals 20% or more of common stock or 20% or more of the voting power outstanding before the issuance; or (b) equal to 20% or more of the common stock or 20% or more of the voting power outstanding before the issuance for less than the greater of book or market value of the stock.
Because the total number of shares issued by us to date in connection with the Purchase Agreement has not exceeded 20%, we were not required to seek stockholder approval for those sales. However, future sales under the Purchase Agreement may result in the issuance by us of 20% or more of our outstanding Common Stock, which would require stockholder approval under NASDAQ rules. Accordingly, we are seeking approval from our stockholders of the proposed issuances of shares under the Purchase Agreement in excess of 19.99% of our outstanding Common Stock.
As previously disclosed, we continue to devote substantial resources to product development, clinical trials and commercialization efforts. In order to execute our business plan and successfully commercialize our Lumivascular platform, we require additional working capital. We additionally expect to use cash proceeds from the sale of our Common Stock under the Purchase Agreement to service our outstanding debt, and for general corporate purposes.
Possible Effects of the Proposal
If the stockholders do not approve this Proposal 1, then we will need to find alternative sources of capital to fund our operations in the near term. Such capital may or may not be available to us on terms favorable to us or at all. We can provide no assurance that we will be successful in raising funds pursuant to additional equity or debt financings or that such funds will be raised at prices that do not create substantial dilution for our existing stockholders.
If the stockholders approve this Proposal 1, we expect to sell shares to Lincoln Park as and when needed, unless more attractive sources of capital are identified and secured. Based on the current market price of $[•] as of the record date, the additional issuances could result in substantial dilution to our stockholders.